DCIT., Circle-1(1), Hyderabad, Hyderabad V. M/s Andhra Bank Limited, Hyderabad

ITA 31/HYD/2015

• Counselvise Citation: 3122514 RSA 2015
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 05-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SUDHAKAR RAO
• Keywords: Business expenditure; Bad and doubtful debts; Capital expenditure
• Section: 43B; 143(3); 14A; 37

Judgement Text

ITA NOS.42 AND 31 OF 2015 ANDHRA BANK HYDERABAD PAGE 1 OF 16 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER & SMT. P. MADHAVI, JUDICIAL MEMBER ITA NO. 42/HYD/2015 (ASSESSMENT YEAR: 2011-12) ANDHRA BANK 5-9-11 HEAD OFFICE SAIFABAD, HYDERABAD 500004 PAN- AAABCA 7375 C VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1) HYDERABAD (APPELLANT) (RESPONDENT) ITA NO.31/HYD/2015 (A.Y 2001-12) DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1) HYDERABAD VS. ANDHRA BANK 5-9-11 HEAD OFFICE SAIFABAD, HYDERABAD 500004 PAN- AAABCA 7375 C (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. ANANTHAN AND SMT. LALITHA RAMESWARAN FOR REVENUE : SHRI D. SUDHAKAR RAO, CIT DATE OF HEARING : 20.04.2015 DATE OF PRONOUNCEMENT : 24 .04.2015 O R D E R PER SMT. P. MADHAVI, J.M. THERE ARE CROSS APPEALS PREFERRED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF THE CIT (A)-II HYDERAB AD, DATED 21.10.2014 RELATING TO A.Y 2011-12. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE BA NK FILED ITS RETURN OF INCOME ON 22.09.2011 DECLARING INCOME OF ITA NOS.42 AND 31 OF 2015 ANDHRA BANK HYDERABAD PAGE 2 OF 16 RS.746,69,40,774. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, THE AO MADE CERTAIN DISALLOWANCE S AND THE CONSEQUENTIAL ADDITIONS TO THE RETURNED INCOME OF T HE ASSESSEE AND BROUGHT IT TO TAX. ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT (A) WHO GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGAINST THE RELIEF GRANTED BY THE CIT (A), REVENUE IS IN APPEAL BEFORE US, WHILE AGAINST THE CONFIRMATION OF CERTAIN ADDITIONS BY THE CIT (A), ASSESSEE IS IN APPEAL BEFORE US. AT THE TIME OF HEA RING THE LD COUNSEL FOR THE ASSESSEE HAS FILED CHARTS DEPICTING THE GROUNDS RAISED BY THE REVENUE IN REVENUES APPEAL AND ALSO THE GROUNDS RAISED BY THE ASSESSEE IN ITS APPEAL AND AS TO HOW THESE GROUNDS ARE COVERED IN FAVOUR OF OR AGAINST THE ASSESSEE. T AKING THE SAID CHARTS INTO CONSIDERATION AND AFTER HEARING BOTH TH E PARTIES, WE DECIDE THE ISSUES AS UNDER: ITA NO.31/HYD/2015 3. IN THE REVENUE APPEAL, THE FIRST GROUND OF APPEA L RAISED BY THE REVENUE IS AGAINST THE DELETION OF THE DISALLOW ANCE OF BROKEN PERIOD INTEREST PAID BY THE ASSESSEE ON PURCHASE OF LONG TERM SECURITIES AND CLAIMED AS EXPENDITURE BY THE ASSESS EE. THE AO MADE THE DISALLOWANCE HOLDING THAT THE SECURITIES A RE PURCHASED BY THE ASSESSEE AS CAPITAL OUTLAY AND THEREFORE INT EREST ELEMENT IN THE PURCHASE IS ALSO CAPITAL IN NATURE. ON APPEA L, THE CIT (A) HAD GIVEN RELIEF BY FOLLOWING THE DECISION OF THE I TAT IN ASSESSEES OWN CASE FOR A.YS 2005-06 TO 2010-11, WHEREIN THE D ECISION OF BOMBAY HIGH COURT IN THE CASE OF AMERICAN EXPRESS INTERNATIONAL LTD VS. CIT (285 ITR 601 (BOM.), WAS FOLLOWED, WHEREIN IT WAS HELD THAT THE SECURITIES WHICH ARE H ELD FOR ITA NOS.42 AND 31 OF 2015 ANDHRA BANK HYDERABAD PAGE 3 OF 16 COMPLYING WITH SLR (STATUTORY LIQUIDITY RATIO) ARE TO BE HELD AS STOCK-IN-TRADE AND THE BROKEN PERIOD INTEREST INCLU DED IN THE PURCHASE PRICE OF SUCH GOVT. SECURITIES IS REVENUE IN NATURE AND IS ALLOWABLE. THE LD DR RELIED UPON THE ORDER OF TH E AO WHILE THE LD AR SUPPORTED THE ORDER OF THE CIT (A) AND ALSO P LACED RELIANCE UPON THE ORDERS OF THE TRIBUNAL IN EARLIER A.YS AS WELL AS THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT VS. CITI BANK REPORTED IN 2008 (8 TMI 766). 4. ON CONSIDERATION OF THE RIVAL CONTENTIONS AND ON PERUSAL OF THE MATERIAL ON RECORD, WE FIND THAT THIS ISSUE HAD ARISEN IN THE ASSESSEES OWN CASE FOR THE A.Y 2008-09 AND THE TRI BUNAL HAS FOLLOWED ITS DECISION IN THE ASSESSEES OWN CASES I .E. IN ITA NOS.95 97 AND 218/H/2010 DATED 4.4.2013 FOR THE A .YS 2001- 02, 2003-04 AND 2006-07 AND ITA NO.S.1592 & 1644/HY D/2008 DATED 30.04.2013 FOR THE A.Y 2005-06 WHEREIN THE IS SUE WAS DECIDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE R EVENUE. SINCE THE REVENUE HAS NOT BEEN ABLE TO BRING ANY DECISION CONTRARY TO THE ABOVE MENTIONED DECISIONS IN ASSESSEES OWN CAS E FOR THE A.Y 2008-09, WE DO NOT FIND ANY REASON TO INTERFERE WIT H THE ORDER OF THE CIT (A). ACCORDINGLY, THIS GROUND OF THE REVENU E IS REJECTED. 5. THE SECOND ISSUE IS AGAINST THE CIT (A) ALLOWING THE DEDUCTION OF UNREALIZED INTEREST ON NPA. THE GRIEVA NCE OF THE REVENUE IS THAT THE CIT (A) HAS IGNORED THE DECISI ON OF THE APEX COURT IN THE CASE OF STATE BANK OF TRAVANCORE VS. C IT (158 ITR 102) ON A SIMILAR ISSUE. IT IS SEEN THAT SIMILAR G ROUND WAS RAISED BY THE REVENUE IN THE ASSESSEES OWN CASE FOR THE A .Y 2008-09 IN ITA NOS.42 AND 31 OF 2015 ANDHRA BANK HYDERABAD PAGE 4 OF 16 ITA NO.244/HYD/2014 AND THE TRIBUNAL AT PARA 5 OF I TS ORDER HELD AS AS UNDER: 5. WE HEARD BOTH SIDES AND PERUSED THE IMPUGNED ORD ERS OF THE REVENUE AUTHORITIES AND OTHER MATERIAL AVAIL ABLE ON RECORD. WE FIND THAT ON THIS ISSUE, THE DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE DATED 30.4.2013 FOR THE ASSESSMENT YEAR 2005-06 IN ITA NOS. 1592 & 1644/HYD/ 2008, IS IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE, AND THE IMPUGNED ORDER OF THE CIT(A) ON THIS ISSUE IS IN CONSONANCE WITH THE SAID ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2005-06. IN THIS VIEW OF THE MATTER , WE FIND NO MERIT IN THE ABOVE GROUND OF THE REVENUE ON THIS ISSUE. WE ACCORDINGLY UPHOLD THE ORDER OF THE CIT(A ) ON THIS ISSUE AND REJECT THE ABOVE GROUND OF THE REVENUE. 6. RESPECTFULLY FOLLOWING THE DECISION OF THE COORD INATE BENCH, THIS GROUND OF APPEAL OF THE REVENUE IS REJECTED. 7. GROUND NO.3 IS AGAINST THE ORDER OF THE CIT (A) DELETING THE DISALLOWANCE OF CLAIM OF PAYMENT TO LIC FOR GROUP L EAVE ENCASHMENT SCHEME FOR THE EMPLOYEES OF THE ASSESSEE . ACCORDING TO THE REVENUE, THE CIT (A) HAS NOT APPRE CIATED THE FACT THAT THE EXPENDITURE IS HIT BY THE PROVISIONS OF SECTION 40A(9) AND 43B(F) OF THE ACT. IT IS SEEN THAT THIS ISSUE IS ALSO COVERED BY THE DECISION OF THE TRIBUNAL IN THE ASSE SSEES OWN CASE FOR A.Y 2008-09 AND THE TRIBUNAL AT PARA NOS.2 9 TO 34 HAS HELD AS UNDER: 29. THE NEXT EFFECTIVE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL RELATES TO DISALLOWANCE OF PREMIUM OF RS.148,36,49,5 16 PAID TO LIFE INSURANCE CORPORATION OF INDIA TOWARDS LEAVE E NCASHMENT POLICY TAKEN BY THE ASSESSEE FOR ITS EMPLOYEES. 30. FACTS OF THE CASE IN BRIEF RELATING TO THIS ISS UE ARE THAT THE ASSESSEE CLAIMED DEDUCTION IN THE COMPUTATION OF IN COME OF ITA NOS.42 AND 31 OF 2015 ANDHRA BANK HYDERABAD PAGE 5 OF 16 RS.124.82 CRORES TOWARDS PAYMENT MADE TO LIC GROUP LEAVE ENCASHMENT SCHEME. DURING THE COURSE OF ASSESSMENT, THE CLAIM WAS REVISED TO RS.148.36 CRORES, AS THE CLAIM FOR DE DUCTION OF RS.10.576 CRORES FOR ASSESSMENT YEAR 2006-07 AND RS .12.97 CRORES FOR ASSESSMENT YEAR 2007-08 WERE NOT ALLOWED BY THE ASSESSING OFFICER IN THOSE RESPECTIVE ASSESSMENT YE ARS . THE ENTIRE AMOUNT OF RS.148.36 CRORES WAS SAID TO HAVE B EEN PAID DURING THE RELEVANT PREVIOUS YEAR. THE ASSESSING OF FICER DID NOT ALLOW THE DEDUCTION CLAIMED BY THE ASSESSEE FOR THE FOLLOWING REASONS- A) THE PAYMENT WAS NOT MADE DIRECTLY BY THE ASSESSE E, RATHER THE PAYMENT WAS MADE TO LIC GROUP LEAVE ENCASHMENT SCHEME AND THEREFORE, SUCH PAYMENT IS NOT ALLOWABLE UNDER S.43B(F) OF THE ACT. B) THE PAYMENT MADE IS NOT DEBITED TO PROFIT & LOSS ACCOUNT, BUT WAS MADE OUT OF GENERAL RESERVES C) THE LIC GROUP LEAVE ENCASHMENT SCHEME IS NOT RECOGNIZED/APPROVED AS PER S.36(1)(VI)/(V) OF THE A CT, AND THEREFORE, IT IS IN VIOLATION OF PROVISIONS OF S.40 A(9) OF THE ACT. 31. ON APPEAL, THE CIT(A) SUSTAINED THE DISALLOWANC E MADE BY THE ASSESSING OFFICER. HENCE, ASSESSEE IS IN SECOND APPEAL ON THIS ISSUE. 32. WE HEARD BOTH SIDES AND PERUSED THE IMPUGNED OR DERS OF THE REVENUE AUTHORITIES AND OTHER MATERIAL AVAILABLE ON RECORD. WE FIND THAT ON THIS ISSUE, THE DECISION OF THE TRIBUN AL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2006-07, VIZ. IN I TA NOS.95 TO 97 & 218/HYD/2013 DATED 4.4.2013, IS IN AGAINST THE A SSESSEE, AND THE IMPUGNED ORDER OF THE CIT(A) ON THIS ISSUE IS IN CONSONANCE WITH THE SAID ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEARS 2006-07. HOWEVER, THE RECENT DECIS IONS OF THE UTTARAKHAND HIGH COURT IN THE CASE OF CIT V/S. NAIN ITAL BANK LTD. (2014)8 TAX CORP(DT)56471; AND OF THE KERALA HI GH COURT IN THE CASE OF CIT V/S. HINDUSTAN LATEX LTD. (2012) 22 TAXMANN.COM 332, RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESSEE BEFORE US, DULY FURNISHING COPIES THEREOF IN THE PAPER- BOOK, ARE IN FAVOUR OF THE ASSESSEE. IT HAS BEEN HE LD BY THE UTTARAKHAND HIGH COURT IN THE CASE OF NAINITAL BANK LTD. (SUPRA) AS FOLLOWS- '4 .IT IS NOT IN DISPUTE THAT THE PAYMENT OF THE PREMI UM IN QUESTION IS NOT AN EXPENDITURE OF THE NATURE DESCRI BED IN SECTIONS 30 TO 36. IN ORDER TO SHOW THAT THE EXPEND ITURE WAS NOT IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONA L EXPENSES ITA NOS.42 AND 31 OF 2015 ANDHRA BANK HYDERABAD PAGE 6 OF 16 OF THE ASSESSEE AND HAD BEEN SPENT WHOLLY AND EXCLU SIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSION, REFERENCE WA S DRAWN TO SECTION 43B(F) OF THE ACT. INASMUCH AS, SECTION 43B CONTAINS NON-OBSTANTE PROVISION AND THERE IN CLAUSE (F) PAYM ENT BY THE ASSESSEE AS EMPLOYER IN LIEU OF ANY LEAVE TO TH E CREDIT OF ITS EMPLOYEES HAS BEEN RECOGNIZED AS A REVENUE EXPE NDITURE AND HAS BEEN CERTIFIED AS AN EXPENDITURE NOT FOR PE RSONAL EXPENSES OF THE ASSESSEE AND THAT THE SAME IS WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROFESSI ON OF THE ASSESSEE. A COVER OBTAINED TO DISCHARGE SUCH RECOGN IZED OBLIGATION WILL NOT COME UNDER SECTION 37 OF THE AC T IS NOT ACCEPTED. 33. IN THE CASE OF HINDUSTAN LATEX LTD. (SUPRA), WH ICH IN FACT WAS IN THE CONTEXT OF ORDER OF THE COMMISSIONER PAS SED UNDER S.263 OF THE ACT, DEALING WITH ELIGIBILITY OF DEDUC TION IN RESPECT OF PREMIA PAID TOWARDS INSURANCE COVER, THE KERALA HIGH COURT HAS HELD THAT WHAT IS INTENDED BY CLAUSE (F) OF S.4 3B WAS TO DENY DEDUCTION FOR LIABILITIES NOT ACTUALLY INCURRED AND TO EXCLUDE PROVISIONS MADE AGAINST FUTURE LIABILITIES FROM BEI NG GRANTED AS DEDUCTION. IN THE CASE OF INSURANCE PREMIA PAID, IT WAS OBSERVED, THE SAME WAS NOT A PROVISION FOR FUTURE L IABILITY WHICH WAS CLAIMED AS A DEDUCTION. THE ASSESSEE HAD INSURED ITSELF AGAINST THE LIABILITIES THAT MAY ARISE ON AC COUNT OF THE CLAIMS ITA NO.167/HYD/2014 & FIVE OTHERS M/S. ANDHRA BANK, HYDERABAD MADE BY THE EMPLOYEES TOWARDS LEAVE ENCAS HMENT. THE ASSESSEE BEING COVERED BY A VALID INSURANCE POL ICY AND PREMIUM BEING REGULARLY PAID, INCURS NO LIABILITY T OWARDS LEAVE ENCASHMENT. THE LIABILITY BEING COVERED BY A VALID INSURANCE POLICY, IS SOLELY THAT OF THE INSURER. THEREFORE, I T WAS HELD THAT EVEN IF 43B (F) STANDS, IN THE CASE OF THE ASSESSEE , WHERE THE LIABILITY IS BORNE BY THE INSURER, THERE CAN BE NO SITUATION WHEREIN ASSESSEE COULD MAKE A VALID CLAIM FOR DEDUC TION U/S 43B(F) SINCE THE ACTUAL LIABILITY IS NOT INCURRED I N ANY OF THE YEARS. THE PREMIUM PAID TOWARDS THE RENEWAL AND CON TINUED VALIDITY OF THE INSURANCE POLICY NECESSARILY BECOME S BUSINESS EXPENDITURE WHOLLY AND EXCLUSIVELY INCURRED FOR THE BUSINESS PURPOSE AND ALLOWABLE AS A DEDUCTION U/S 37. 34. IN VIEW OF THE ABOVE, RESPECTFULLY FOLLOWING TH E RECENT DECISIONS OF THE UTTARAKHAND HIGH COURT IN THE CASE OF CIT V/S. NAINITAL BANK LTD. (SUPRA); AND OF THE KERALA HIGH COURT IN THE CASE OF CIT V/S. HINDUSTAN LATEX LTD. (SUPRA), IN P REFERENCE TO THE EARLIER DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2006-07, WE ACCEPT THE CONTENTIONS OF THE ASSESSEE ON THIS ISSUE, AND DELETE THE ADDITION MAD E BY THE ITA NOS.42 AND 31 OF 2015 ANDHRA BANK HYDERABAD PAGE 7 OF 16 ASSESSING OFFICER IN THIS BEHALF. ASSESSEE'S GROUND S ON THIS ISSUE ARE ALLOWED. 8. RESPECTFULLY FOLLOWING THE DECISION OF THE COORD INATE BENCH IN ASSESSEES OWN CASE, THIS GROUND OF APPEAL OF TH E REVENUE IS REJECTED. 9. GROUND NO.4 IS AGAINST THE ORDER OF THE CIT (A) DELETING THE DISALLOWANCE U/S 14A OF THE ACT. ACCORDING TO THE R EVENUE, THE CIT (A) HAS IGNORED THE FACT THAT THE EXPENDITURE B Y WAY OF INTEREST DURING THE PREVIOUS YEAR IS NOT DIRECTLY A TTRIBUTABLE TO ANY PARTICULAR INCOME OR RECEIPT. WE FIND THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE COORDINATE BENCH IN ITA NO.244/HYD/2014 DATED 18.07 .2014, IN ASSESSEES OWN CASE FOR A.Y 2005-06 IN WHICH THE TRIBUNAL AT PARA 41 HAS HELD AS UNDER: 41. WE HEARD BOTH SIDES AND PERUSED THE IMPUGNED ORD ERS OF THE REVENUE AUTHORITIES AND OTHER MATERIAL AVAILABL E ON RECORD. WE FIND THAT THE ASSESSEE ITSELF HAS DISALL OWED AN AMOUNT OF RS.33,41,474, BEING TWO MONTHS' SALARY OF OF FICERS AND STAFF WORKING IN INVESTMENT DEPARTMENT UNDER S. 14A. WE ARE OF THE OPINION THAT THE ASSESSING OFFICER HAS N OT PROPERLY APPRECIATED THE FACTS OF THE CASE AND HAS MECHANICA LLY APPLIED RULE 8D IN THIS CASE. THE SHARES WERE HELD AS STOCK -IN-TRADE AND NOT AS 'INVESTMENTS'. HENCE, PROFIT OR LOSS HAS TO BE CONSIDERED UNDER THE HEAD 'BUSINESS OR PROFESSION' AND THE CLAIM OF EXPENSES ARE TO BE CONSIDERED UNDER THE HE AD 'BUSINESS' AND PROVISIONS OF S.14A AND RULE 8D ARE NOT APPLICA BLE. THE COCHIN BENCH OF THE TRIBUNAL IN THE CASE OF STATE B ANK OF TRAVANCORE (318 ITR 17) HELD THAT ANY EXPENDITURE I NCURRED BY THE ASSESSEE BANK FOR INVESTING IN THE BONDS EVEN T AX- FREE WAS EXPENDITURE INCURRED FOR CARRYING ON ITS BUSINESS S O AS TO MAINTAIN THE REQUIRED STATUTORY LIQUIDITY RATIO AND TAX FREE INTEREST IS JUST AN INCIDENCE TO IT. THEREFORE, SIN CE THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE TO EARN THE SAID D IVIDEND ITA NOS.42 AND 31 OF 2015 ANDHRA BANK HYDERABAD PAGE 8 OF 16 INCOME, THE EXPENDITURE CANNOT BE DISALLOWED AND TH E ASSESSEE IS ENTITLED TO THE BENEFIT OF DEDUCTION OF THE ENTIRE EXPENDITURE. WE ARE OF THE OPINION THAT THERE ARE N O DIRECT EXPENSES ATTRIBUTABLE TO THE DIVIDEND INCOME EARNED BY THE ASSESSEE, AND THE DECISION OF THE KARNATAKA HIGH CO URT IN THE CASE OF CCI LTD. V/S. JCIT (212.TIOL.251) ALSO SUPP ORTS THIS VIEW. HOWEVER, ASSESSEE ITSELF HAS DISALLOWED AN AM OUNT OF RS.33,41,474, BEING TWO MONTH'S SALARY OF OFFICERS AN D STAFF WORKING IN INVESTMENT DEPARTMENT UNDER S.14A, AND T HE SAID DISALLOWANCE MADE BY THE ASSESSEE ITSELF WORKS OUT TO ALMOST 2% OF THE TAX-FREE INCOME RECEIVED. THE COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2007- 08, VIDE ITS ORDER DATED 4.10.2013 IN ITA NO.630/HYD /2012, HAS HELD DISALLOWANCE 2% OF THE TAX-FREE INCOME EAR NED BY THE ASSESSEE AS REASONABLE. TAKING INTO ACCOUNT, THE TO TAL TAX-FREE INCOME OF RS.17,15,33,910 EARNED BY THE ASSESSEE, W E FIND THAT THE DISALLOWANCE OF RS.33,41,474 OFFERED BY THE ASSE SSEE ITSELF IN TERMS OF S.14A, WORKING OUT TO ALMOST 2%, IS QUITE REASONABLE AND IN CONSONANCE WITH THE VIEW TAKEN BY THE TRIBUN AL FOR THE PRECEDING YEAR. IN THIS VIEW OF THE MATTER, WE ACCE PT THE GROUNDS OF THE ASSESSEE ON THIS ISSUE, AND DELETE T HE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN TERMS OF S.14A READ WITH RULE 8D OF THE ACT. 10. RESPECTFULLY FOLLOWING THE DECISION OF THE COOR DINATE BENCH ON THE VERY SAME ISSUE IN THE EARLIER A.Y, THE CIT (A) HAS ALLOWED RELIEF TO THE ASSESSEE. THEREFORE, WE DO NOT SEE AN Y REASON TO INTERFERE WITH THE ORDER OF THE CIT (A) AND ACCORDI NGLY THIS GROUND OF THE APPEAL OF THE REVENUE IS REJECTED. 11. AS REGARDS GROUND NO.5 AGAINST THE ORDER OF THE CIT (A) DELETING THE DISALLOWANCE OF ASSESSEES CLAIM ON AC COUNT OF ANDHRA BANK RURAL DEVELOPMENT TRUST, THE GRIEVANCE OF THE REVENUE IS THAT THE CIT (A) HAS IGNORED THE FACT TH AT THE CORPORATION SOCIAL RESPONSIBILITY, IF ANY, INCURRED BY THE ASSESSEE SHOULD BE MET OUT OF PROFIT AFTER TAX AND NOT PROFI T BEFORE TAX AND FURTHER IGNORING THAT THE SAME WAS NOT WHOLLY AND E XCLUSIVELY ITA NOS.42 AND 31 OF 2015 ANDHRA BANK HYDERABAD PAGE 9 OF 16 USED FOR THE PURPOSE OF ASSESSEES BUSINESS. WE FIN D THAT THIS ISSUE HAD ARISEN IN ASSESSEES OWN CASE FOR A.Y 200 8-09 AND THE TRIBUNAL AT PARA 12 TO 17 OF ITS ORDER HAS HELD AS UNDER: 12. BRIEF FACTS OF THE CASE RELATING TO THIS ISSUE ARE THAT THE ASSESSEE CLAIMED AN AMOUNT OF RS.2,04,34,107 SPENT O N ANDHRA BANK RURAL DEVELOPMENT TRUST, WHICH IS ENGAGED IN C ONDUCTING SEVERAL TRAININGS FOR PROVIDING SELF EMPLOYMENT TO RURAL YOUTH. AFTER THE TRAINING, THE BANK ALSO PROVIDED FINANCE TO THE RURAL YOUTH. THIS AMOUNT, CLAIMED BY THE ASSESSEE WAS DIS ALLOWED BY THE ASSESSING OFFICER, FOR THE FOLLOWING REASONS- A) NONE OF THE ACTIVITIES/TRAININGS CONDUCTED BY TH E BANK RELATED TO BANKING ACTIVITY. B) IT IS FARFETCHED TO STATE THAT AMOUNT SPENT ON S UCH ACTIVITIES WAS 'WHOLLY AND EXCLUSIVELY' FOR THE PURPOSE OF BUS INESS OF THE ASSESSEE. C) AS PER THE CORPORATE SOCIAL RESPONSIBILITY VOLUN TARY LOANS 2009 PUBLISHED BY THE MINISTRY OF CORPORATE AFFAIRS , THOUGH NOT BINDING, COMPANIES SHOULD ALLOCATE SPECIFIC AMOUNT FROM THE BUDGET FOR CSR ACTIVITIES. THIS AMOUNT MAY BE RELAT ED TO PROFITS AFTER TAX. FOR THE ABOVE REASONS AND OBSERVING FURTHER THAT TH E AMOUNT SPENT TOWARDS CORPORATE SOCIAL RESPONSIBILITY ARE T O BE MET OUT OF PROFITS AND AS SUCH, CANNOT BE DEDUCTED BEFORE A RRIVING AT TAXABLE PROFITS, THE ASSESSING OFFICER DISALLOWED T HE CLAIM OF THE ASSESSEE AND MADE AN ADDITION OF RS.2,04,34,107. 13. ON APPEAL, THE CIT(A) CONSIDERING THE OBJECTIVE S OF THE TRUST AND DETAILS OF THE PROGRAMMES CONDUCTED BY THE TRUS T OBSERVED THAT THE TRUST WAS FORMED WITH THE NOBLE OBJECTIVE OF PROVIDING EMPLOYMENT TO THE RURAL YOUTH BY WAY OF PROVIDING T RAINING AND ALSO THE REQUIRED CREDIT TO HELP THEM TO BE SEL F- EMPLOYED. FOR THESE REASONS AND ALSO FOR THE REASONS DISCUSSE D IN PARA 13.4 OF THE IMPUGNED ORDER, EXTRACTED HEREUNDER, TH E CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER IN THIS BEHALF. '13.4 THE APPELLANT ALSO SUBMITTED THE STATISTICS A S THE NUMBER OF CANDIDATES TRAINED IN EACH DISTRICT AND THE NUMBER OF CANDIDATES TO WHOM CREDIT WAS PROVIDED BY THE BANK. DURING THE FI NANCIAL YEAR, THE TOTAL NUMBERS OF CANDIDATES TRAINED WERE 7,671 AND NUMBER OF CANDIDATES TO WHOM CREDIT FACILITIES WERE GIVEN 2,744. IN THE ITA NOS.42 AND 31 OF 2015 ANDHRA BANK HYDERABAD PAGE 10 OF 16 PROCESS OF PROVIDING CREDIT FACILITIES TO UNEMPLOYE D TO YOUTH IN RURAL AREAS, THE BANK IS EXTENDING ITS ACTIVITIES. THE PROJECT TAKEN UP BY THE BANK IS WORKING ON THE PRINCIPLE OF 'SYMB IOSIS' THAT IT IS HELPING ITSELF IN THE PROCESS OF HELPING THE RURAL YOUTH. IN THIS BACKGROUND, IT CANNOT BE SAID THAT THE EXPENSES ARE NOT INCURRED 'WHOLLY AND EXCLUSIVELY' FOR THE PURPOSE OF BUSINES S. THEREFORE, THIS GROUND OF APPEAL IS ALLOWED. ' 14. AGGRIEVED BY THE RELIEF GRANTED BY THE CIT(A), R EVENUE IS IN APPEAL BEFORE US ON THIS ISSUE. 15. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY SU PPORTING THE ORDER OF THE ASSESSING OFFICER SUBMITTED THAT T HE CIT(A) IS NOT JUSTIFIED IN DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 16. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OT HER HAND, STRONGLY SUPPORTED THE ORDER OF THE CIT(A) AND PLAC ED RELIANCE ON THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT V/S, INFOSYS LTD. (360 ITR 714)-KAR. THE LEARNED CO UNSEL FURTHER SUBMITTED THAT THE ASSESSEE HAS A CORPORATE SOCIAL RESPONSIBILITY, BY CONDUCTING TRAINING PROGRAMMES F OR RURAL UNEMPLOYED YOUTH, AND LATER ON EXTENDING THEM CREDI T FACILITIES FOR STARTING THEIR OWN ENTERPRISE. HENCE, IT IS SUB MITTED THAT THE EXPENDITURE IN QUESTION HAS BEEN LAID OUT WHOLLY LA ND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, AND AS SUC H IS CLEARLY ALLOWABLE UNDER S.37(1) OF THE ACT. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE ORDERS OF THE REVENUE AUTHORITIES AND OTHER MATERIA L AVAILABLE ON RECORD. UNDISPUTEDLY, THE EXPENDITURE IN QUESTIO N RELATES TO THE TRAINING OF UNEMPLOYED RURAL YOUTH BY CONDUCTIN G TRAINING PROGRAMMES, TO WHOM IT IS SUBMITTED THAT CREDIT FAC ILITIES ARE EXTENDED FOR STARTING THEIR OWN ENTERPRISES. THE CI T(A) HAS NOTED THE NUMBER OF YOUTH TRAINED, AND THE NUMBER O F PERSONS TO WHOM SUCH CREDIT FACILITIES ARE EXTENDED DURING THE YEAR. THE QUESTION FOR CONSIDERATION BEFORE US IS WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE IN CONDUCTING SUCH TRAININ G PROGRAMMES CAN BE SAID TO HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF BANKING BUSINESS BE ING CONDUCTED BY THE ITA NO.167/HYD/2014 & FIVE OTHERS M /S. ANDHRA BANK, HYDERABAD ASSESSEE, AND EVEN IF IT IS NOT CONNECTED WITH THE BUSINESS OF THE ASSESSEE, CAN IT BE ALLOWED BY TREATING THE SAME AS HAVING BEEN INCURRED BY THE AS SESSEE IN THE DISCHARGE OF ITS SOCIAL RESPONSIBILITY. IN THE CASE OF INFOSYS TECHNOLOGIES LTD. (SUPRA), HON'BLE KARNATAKA HIGH C OURT CONSIDERED THE EXPENDITURE CLAIMED BY THE ASSESSEE ON INSTALLATION OF TRAFFIC SIGNALS AT BANNERGHATA CIRC LE, BANGALORE, ITA NOS.42 AND 31 OF 2015 ANDHRA BANK HYDERABAD PAGE 11 OF 16 AS EXPENDITURE HAVING BEEN INCURRED BY THE ASSESSEE IN DISCHARGE OF ITS CORPORATE SOCIAL RESPONSIBILITIES, WHICH ALSO FACILITATED THE BUSINESS OF THE ASSESSEE, AND HENCE ALLOWABLE AS DEDUCTION UNDER S.37(1) OF THE ACT. SIMILARLY, COOR DINATE BENCH OF THE TRIBUNAL IN CROSS APPEALS OF NMDC LTD., HYDE RABAD FOR THE ASSESSMENT YEAR 2008-09, VIDE ORDER DATED 28.2. 2014 IN ITA NO.714 & 885/HYD/2012, TO WHICH BOTH OF US ARE SIGNA TORIES, FOLLOWING THE STILL EARLIER ORDER OF THE TRIBUNAL I N THAT VERY CASE, HELD DONATION OF RS.5 CRORES MADE BY THE ASSESSEE T HEREIN TO A MEDICAL COLLEGE, THOUGH NOT RELATED TO THE BUSINESS OF THE ASSESSEE, AS HAVING BEEN INCURRED IN FURTHERANCE OF A CORPORATE SOCIAL RESPONSIBILITY AND HENCE ALLOWABLE AS DEDUCT ION UNDER S.37 OF THE ACT. IN THE FACTS OF THE PRESENT CASE, THE AMOUNT SPENT BY THE ASSESSEE-BANK, WAS NOT ONLY IN DISCHARGE OF CORPORATE SOCIAL RESPONSIBILITY TO TRAIN THE RURAL YOUTH, BUT ALSO TO INDIRECTLY TO PROMOTE ITS OWN BUSINESS, SINCE THE R URAL YOUTH TRAINED WERE ITS PROSPECTIVE CLIENTS, AS THE BANK A LSO INTENDED TO EXTENDED CREDIT FACILITIES TO SUCH UNEMPLOYED YOUTH FOR STARTING THEIR OWN ENTERPRISES. IN THIS VIEW OF THE MATTER, FOLLOWING THE DECISION OF THE KARNATAKA HIGH COURT NOTED ABOVE, C ONSISTENT VIEW TAKEN BY COORDINATE BENCHES OF THIS TRIBUNAL, IN SIMILAR CIRCUMSTANCES, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A). WE ACCORDINGLY UPHOLD THE SAME REJECTING THE GROUND OF THE REVENUE ON THIS ISSUE. 12. RESPECTFULLY FOLLOWING THE COORDINATE BENCH DEC ISION, THE CIT (A) HAS DECIDED THIS ISSUE ALSO IN FAVOUR OF TH E ASSESSEE AND THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE WI TH THE SAME AND THE REVENUES GROUND OF APPEAL IS REJECTED. 13. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ITA NO. 42/HYD/2015 14. IN THE ASSESSEES APPEAL, ASSESSEE HAS RAISED A S MANY AS FOUR GROUNDS OF APPEAL, BUT GROUNDS NO.1 AND 4 ARE GENERAL IN NATURE, HENCE NEEDS NO ADJUDICATION. THE EFFECTIVE GROUNDS ARE THEREFORE ONLY GROUNDS 2 & 3 WHICH ARE AS FOLLOWS: ITA NOS.42 AND 31 OF 2015 ANDHRA BANK HYDERABAD PAGE 12 OF 16 2. THE CIT (A) ERRED IN LAW IN CONFIRMING THE ACTI ON OF THE AO IN CONSIDERING RS.1372,45,64,987 WHICH REPRESENTS PROVISION FOR BAD AND DOUBTFUL DEBTS CLAIMED AND ALLOWED THE APPELLANT OVE RTHE LAST SO MANY YEARS AS DEDUCTION U/S 36(1)(VIIA) OF THE ACT AS INCOME. 2.1 THE CIT (A) FAILED TO APPRECIATE THE FACT THAT THERE IS NO PROVISION IN THE INCOME TAX ACT UNDER WHICH SUCH PROVISION CAN BE CONSIDERED AS INCOME. 3. THE CIT (A) ERRED IN LAW IN UPHOLDING THE ACTION OF THE AO IN CONSIDERING RS.19,59,29,028 OF INTEREST CREDITED BY THE LIC IN LEAVE ENCASHMENT SCHEME AS INCOME OF THE APPELLANT. 3.1 THE CIT (A) FAILED TO APPRECIATE THE FACT THAT WHEN ONLY THE NET AMOUNT OF PREMIUM PAID BY THE ASSESSEE TO THE LIC I.E. GROSS AMOUNT OF PREMIUM PAYABLE LES S INTEREST ACCRUED TO THE ASSESSEE FROM THE SCHEME IS ALLWOED AS DEDUCTION INSTEAD OF THE GROSS AMOUNT OF PREMIUM PAYABLE, ADDITION OF THE INTEREST AMOUNT OF RS.19,59,29,028 AS INCOME IS INDIRECTLY LEADING TO TAXATION OF THE SAME AMOUNT TWICE. 3.2 WITHOUT PREJUDICE TO THE ABOVE AND ALTERNATIVELY, AMOUNT OF RS.19,59,29,028 TREATED AS INCOME BE ALLOWED AS DEDUCTION AS THE SAME IS CONTRIBUTED BACK TO THE FUND. 15. AS REGARDS GROUND NO.3.1, THE LD COUNSEL FOR TH E ASSESSEE HAS SUBMITTED THAT THIS ISSUE IS COVERED AGAINST TH E ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ITA NO.245/HYD/2014 FOR A.Y 2008-09 DATED 18.7.2014. HOWEVER, HE SUBMITTED THAT THE ALTERNATE GROUND 3.2 IS COVERED IN FAVOUR OF THE AS SESSEE BY THE DECISION OF THE COORDINATE BENCH DATED 18.7.2014 IN ITA NO.244/HYD/2014. ON PERUSAL OF THE MATERIAL ON RECO RD, WE FIND THAT THE ASSESSEE HAD NOT RAISED THIS ALTERNATE GRO UND BEFORE THE ITA NOS.42 AND 31 OF 2015 ANDHRA BANK HYDERABAD PAGE 13 OF 16 AUTHORITIES BELOW, BUT HAS RAISED IT FOR THE FIRST TIME BEFORE THIS TRIBUNAL. SINCE IT IS AN ALTERNATE AND LEGAL GROUND , WE DEEM IT FIT AND PROPER TO REMAND THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO ADJUDICATE THE SAME DE NOVO IN ACCORDA NCE WITH THE LAW. 16. IN THE RESULT, GROUND NO.3.1 RAISED BY THE ASSE SSEE IS REJECTED AND GROUND NO.3.2 IS TREATED AS ALLOWED FO R STATISTICAL PURPOSES. 17. AS REGARDS GROUND NO.2, BRIEF FACTS ARE THAT DU RING THE SCRUTINY PROCEEDINGS, THE AO DIRECTED THE ASSESSEE TO FURNISH THE DETAILS OF PROVISIONS ON ACCOUNT OF RURAL DEBTS AND THE BAD DEBTS WRITTEN OFF FOR THE PRECEDING YEAR. ASSESSEE SUBMIT TED THE REQUIRED DETAILS AND THE AO OBSERVED THAT THE OPENI NG BALANCE OF THE PROVISION U/S 36(1)(VIIA) WAS RS.1373,47,97,236 /- WHILE THE AMOUNT OF RURAL AND BAD DEBTS WRITTEN OFF DURING A. Y 2011-12 IS RS.102,32,249. AO THEREFORE, ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE DIFFERENCE AMOUNTING TO RS.1037,245,6 9,987 SHOULD NOT BE WRITTEN BACK AND BROUGHT TO TAX AS AN EXCESS PROVISION MADE. ASSESSEE, VIDE LETTER DATED 21.1.20 14, SUBMITTED THAT THE DEDUCTION U/S 36(1)(VIIA) IS ALLOWABLE IN RESPECT OF ANY PROVISION FOR BAD AND DOUBTFUL DEBTS, OF THE AMOUNT S NOT EXCEEDING 7.5% OF THE TOTAL INCOME AND 10% OF THE A GGREGATE AVERAGE OF ADVANCES MADE BY RURAL BRANCH ADVANCES A T THE END OF EVERY YEAR AND ON THE TOTAL INCOME OF THAT YEAR AND THAT EVEN THOUGH, THE ASSESSEE BANK IS ELIGIBLE FOR DEDUCTION OF RS.3424,14,86,915 U/S 36(1)(VIIA) OF THE ACT OVER A NUMBER OF YEARS, ONLY RS.1439,25,73,562 WAS ALLOWED BY RESTRI CTING THE ITA NOS.42 AND 31 OF 2015 ANDHRA BANK HYDERABAD PAGE 14 OF 16 SAME TO THE PROVISIONS CREATED IN THE BOOKS OF ACCO UNTS IN THOSE YEARS. IT WAS SUBMITTED THAT THE BALANCE OF THE PR OVISION FOR BAD AND DOUBTFUL DEBTS AS ON 31.03.2011 WOULD ONLY BE RS.845,22,28,133 AS AGAINST RS.1372,45,64,987 STATE D IN THE NOTICE. THE ASSESSEE ALSO SUBMITTED THE WORKING FOR THE SAME. AO HOWEVER, WAS NOT CONVINCED BY THE ARGUMENT OF TH E ASSESSEE AND HELD THAT AS PER AS-29, A PROVISION IS AN ESTIM ATE OF CERTAIN FUTURE LIABILITY/EXPENSE, ARISING FROM THE BUSINESS CARRIED OUT DURING THE YEAR AND ALLOWABLE U/S 37 AND SUCH PROVI SIONS ARE NORMALLY ADJUSTED/SET-OFF AGAINST THE ACTUAL EXPENS ES OF THE VERY NEXT YEAR AND UNADJUSTED OR UNUTILIZED PROVISION IN EXCESS OF THE ACTUAL EXPENSES UNDER THE SAME HEAD HAS TO BE WRITT EN BACK AS INCOME. HE, THEREFORE, HELD THAT THE UNUTILIZED PRO VISION HAS TO BE WRITTEN BACK AND BROUGHT TO TAX. 18. ON APPEAL, THE CIT (A) CONFIRMED THE ADDITION B Y HOLDING THAT THE CLAIM MADE BY THE SCHEDULED BANK U/S 36(1) (VIIA) SHOULD BE RESTRICTED TO THE EXTENT OF PROVISIONS MA DE IN THE BOOKS OF ACCOUNTS. 19. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD COUNSEL FOR THE ASSESSEE DEMONSTRATED BEFORE US THA T THE CIT (A) HAS CONFIRMED THE DISALLOWANCE ON A TOTALLY ERRONEO US APPRECIATION OF FACTS. HE SUBMITTED THAT THE DISALL OWANCE MADE BY THE AO WAS OF THE UNUTILIZED PORTION OF THE PROV ISION, WHEREAS THE ADDITION CONFIRMED BY THE CIT (A) IS ON THE GRO UND THAT THE PROVISION IS TO BE RESTRICTED TO THE EXTENT IT IS M ADE IN THE BOOKS OF ACCOUNTS. THUS, ACCORDING TO HIM, THE ORDER OF THE CIT (A) AS WELL AS THE AO IS TO BE SET ASIDE. ITA NOS.42 AND 31 OF 2015 ANDHRA BANK HYDERABAD PAGE 15 OF 16 20. THE LD DR HOWEVER, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 21. HAVING REGARD TO THE RIVAL CONTENTIONS, WE FIND THAT THE GROUND ON WHICH THE AO HAS MADE THE DISALLOWANCES I S DIFFERENT FROM THE GROUND ON WHICH THE CIT (A) HAS CONFIRMED THE ADDITION. THUS, IT IS SEEN THAT THERE IS NO APPRECIATION OF F ACTS BY THE CIT (A). THEREFORE, THE ORDER OF THE CIT (A) IS SET ASI DE. COMING TO THE ORDER OF THE AO, WE FIND THAT THE ASSESSEE HAS MADE A PROVISION U/S 36(1)(VIIA) IN ACCORDANCE WITH THE PROVISIONS O F THE ACT AND IF THE ASSESSEE IS NOT ABLE TO SET OFF THE PROVISIONS DURING THE RELEVANT A.Y, IT IS ENTITLED TO CARRY IT FORWARD SU BJECT TO THE MAXIMUM PROVISION ALLOWED UNDER SECTION 36(1)(VIIA) AND THERE IS NO TIME LIMIT FIXED FOR SUCH UTILIZATION. THERE IS NO PROVISION IN THE ACT TO BRING THE UNUTILISED PROVISION TO TAX DU RING THE YEAR. THE RELIANCE OF THE AO ON AS 29 IS ALSO MISPLACED. IN VIEW OF THE SAME, WE SET ASIDE THE ORDER OF THE AO ALSO ON THIS ISSUE AND THE ASSESSEES GROUND OF APPEAL IS ALLOWED. 22. IN THE RESULT ASSESSEES APPEAL IS TREATED AS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. 23. TO SUM UP, REVENUES APPEAL IS REJECTED AND THA T OF THE ASSESSEE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH APRIL, 2015. S D/ - S D/ - (P.M. JAGTAP) (P. MADHAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 24 TH APRIL, 2015. ITA NOS.42 AND 31 OF 2015 ANDHRA BANK HYDERABAD PAGE 16 OF 16 VNODAN/SPS COPY TO: 1. ANDHRA BANK, 5-9-11 HEAD OFFICE, SAIFABAD, HYDERABA D 500004 2. DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1) HYDERAB AD 3. THE CIT(A)-II HYDERABAD 4. THE CIT I HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER